← The Finance Station ~ dish 07 of 10 · the finance station

Pricing Analysis

Pull margins by customer, segment, or product. Surface the three places pricing is leaking. The station surfaces the patterns. The CFO decides what to act on. This is judgment work. The Chef stays in the loop on every plate.

The job

Pricing analysis is where the CFO finds money that’s on the table but not in the bank. Margin by customer reveals that your biggest account is also your lowest margin account. Margin by product shows that one product line is dragging the business down. Margin by geography surfaces that one region is subsidizing another.

Operators know pricing leaks happen. They usually discover them at year-end when the damage is done. The station catches them monthly. The CFO reads the analysis and decides. Do we raise pricing on that customer. Do we sunset that product. Do we restructure the geography.

The station runs this recipe right when it reads the pricing data, calculates margin, clusters the results, and surfaces the pattern. The CFO reads it. The CFO decides.

The recipe

All seven ingredients still apply. The leverage on this dish isn’t a single recipe ingredient. It’s the Four D’s stance. This dish stays in DIALING (or DECIDING) on the Four D’s. The station drafts. The Chef tastes every plate. The station is a thinking partner, not an analyst replacement.

Context matters. The station reads revenue by customer, by product, by segment. It reads cost of goods sold by the same dimension. It reads customer acquisition cost and lifetime value. Examples matter. Show the station a pricing analysis you built by hand. How you cluster customers. How you identify “leaking.”

How to build it

  1. Export revenue by customer for the last 12 months. Include price per unit, units sold, total revenue. Export COGS or cost allocation by the same customer.
  2. Export revenue by product line. Include price, volume, COGS, margin percentage.
  3. Define what “healthy margin” looks like for your business. For software, maybe it’s 75 percent. For services, maybe it’s 40 percent. For products, maybe it’s 30 percent. Anything below that is a candidate for analysis.
  4. Define what “leaking” looks like. Is it a customer with declining margin over three months. A product that’s below healthy margin. A segment that’s dragging overall margin down. Clearly define the pattern you want surfaced.
  5. Pull one pricing analysis you built by hand. Customer margin ranking. Product margin ranking. Whatever dimension matters most to your business. Show the station the format and the insight.
  6. Test on a mock run. Give the station the pricing data from the last three months. It surfaces the three biggest pricing gaps. You read it. Are these real gaps. Are these the gaps that matter. Adjust.
  7. Go live with CFO review on every output. The station surfaces patterns. The CFO reads and decides. No automatic action.

What breaks it

  • Station runs without CFO review. The CFO doesn’t look at the pricing analysis. Decisions don’t get made. The data sits in a folder. Measurement never happens because nobody’s acting on it. Always require CFO review before any pricing decision moves forward.
  • Healthy margin threshold isn’t defined. What counts as a leak. Everything below 30 percent. Below 20 percent. The station doesn’t know. It surfaces everything. The CFO gets a wall of data instead of a focused signal.
  • Cost allocation is incomplete. Revenue by customer is clean. COGS by customer is missing because the company doesn’t track direct costs by customer. The margin calculation is wrong. The pattern is fake. Get the cost allocation right before surfacing patterns.
  • Feedback loop is one-way. The CFO decides to raise pricing on a customer. The decision never makes it back into the recipe. The next month, the station surfaces the same customer as a leak because the recipe doesn’t know the pricing changed.

When it’s working

At week four, the station surfaces one to three new pricing opportunities every month. The CFO reads the analysis in 20 minutes. Sixty percent of the surfaced gaps prompt a decision. Pricing decisions are made faster and with better information. Margins improve by 2-5 percent over a quarter because the gaps are caught monthly, not at year-end.

The signal that the recipe is sharp: the CFO takes action on the patterns the station surfaces.

Monday Move

Export your revenue and COGS by customer for the last 12 months. Define your healthy margin threshold. Define what “leaking” means in your business. The station is running.

Dish 7 of 10 on the Finance Station. Build-note leverage: Four D’s stance (DIALING).